What is called black money?
There is no one definition for black money in economics. In layman’s language, it is money that has been acquired through illegitimate means for which tax is not paid to the government.
Spurious notes or counterfeit money is generally not counted as black money. Counterfeit notes are currency notes that are illegally printed by unauthorized agents.
Black money is hidden from government authorities and is not reflected in the GDP of India, national income, etc.
Cash transactions without proper accounting are known as black money.
Factors leading to generation of Black Money in India.
There are many ways in which black money is generated.
One common method is through tax evasion, where individuals or businesses deliberately under-report their income or over-report their expenses to reduce their tax liability.
Other methods include bribery, smuggling, and money laundering.
Black money is often used to fund illegal activities such as terrorism, drug trafficking, and organized crime.
Impact of Black Money in Indian Economy.
The impact of black money on the economy is significant. By not paying taxes, those involved in the black economy avoid contributing to government revenue, which is necessary to fund public services such as healthcare, education, and infrastructure development.
This, in turn, leads to a shortfall in government revenue, which can result in a rise in public debt and inflation.
Black money also leads to a lack of transparency in the economy, which can undermine public trust in the government and financial institutions.
It creates an uneven playing field for businesses, as those who generate black money can gain a competitive advantage over those who pay their taxes honestly. This can lead to a loss of confidence in the economy and can discourage foreign investment.
Control Measures.
There are several measures that governments can take to combat black money.
One effective way is to increase transparency in the economy by implementing measures such as electronic tax filing, cashless transactions, and stricter enforcement of anti-money laundering laws.
Another approach is to offer amnesty schemes that allow individuals and businesses to declare their black money and pay a penalty, without fear of prosecution.
ð Institutions to deal with Black Money in India.
Central Board of Direct Taxes [CBDT]
Enforcement Directorate [ED]
Financial Intelligence Unit [FIU-IND]
The Central Board of Indirect Taxes and Customs [CBIC] and DRI
Central Economic Intelligence Bureau
Other Central Agencies
Conclusion.
In conclusion, black money is a significant problem that has far-reaching consequences for the economy and society.
Governments must take proactive steps to combat this issue to ensure that the economy operates in a fair and transparent manner.
The public must also do its part by reporting instances of tax evasion and avoiding engaging in illegal or unethical activities that contribute to the generation of black money.
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